Chinese iron ore and steel futures rallied on Friday, breaking a six-day losing streak after hitting one-month lows in the previous session, amid hopes of stronger demand for the metal and its feedstock after the G20 summit.

Iron ore rose almost 4 percent, on track for its biggest daily gain since late-July, due to expectations that mills shuttered for the world meeting in China will resume operations late next week, boosting buying of their key raw material.

Prices were still down 1.6 percent on the week, their largest fall since mid-July, pressured by closures of steel mills around the eastern city of Hangzhou to improve air quality ahead of this weekend's G20 summit.

Analysts said steel prices rallied on Friday as China, the world's biggest steel producer accounting for half of global output, was seen ramping up efforts to close old, inefficient furnaces this year.

The closure of mills around Hangzhou as the government has tried to spruce up the host city for the G20 summit has added further momentum to the gains.

"I think China will speed up consolidation in the steel sector. We will eventually see some rebalancing and this will be good for steel," said analyst Helen Lau of Argonaut Securities in Hong Kong.

The most-active January iron ore on the Dalian Commodity Exchange was up 3.6 percent at 429 yuan ($64.23) a tonne by 0259 GMT, its highest since Aug. 26.

On the Shanghai Futures Exchange, construction steel product rebar dropped 2.3 percent to 2,367 yuan a tonne, having touched a one-month trough of 2,362 yuan earlier. It was on track for a 3.4-percent drop for the week.

Prices were also boosted by China's better-than-expected manufacturing data on Thursday, Lau said.

The market is eyeing a key U.S. jobs report later in the session that could dictate short-term direction in metals prices.

The seasonal peak period for Chinese steel demand in September and October along with a mending economy could spur a recovery.

Iron ore for delivery to China's Tianjin port .IO62-CNI=SI was down 60 cents at $58.4 a tonne on Thursday, according to The Steel Index (TSI).

But ANZ analysts cautioned they expect iron ore prices to continue to track volatile steel prices, keeping them in a range between $50 and $60, as mills ramp up output, which is likely to drag metals prices lower. ($1 = 6.6784 Chinese yuan).

 

Source : reuters.com

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